If you're not super rich, you might have a problem with the tax system.

By Bettijane Levine Times Staff Writer

April 7 2004

If you have no idea what the alternative minimum tax is, and whether you'll pay it on April 15, you're not alone. It's Line 42 on your federal form  and even your trusted CPA may tell you it's too complicated to explain, and not to worry about it. (Ours did.)

But ignore this stealth tax at your own future peril, says Pulitzer Prize-winning tax reporter David Cay Johnston in his book "Perfectly Legal" (Portfolio).

In the next few years, if you're middle or upper-middle class, "it can make you lose your deductions for yourself, your spouse, your children, your state income tax and local property taxes." Enacted in 1969 and meant only for those with the highest incomes, the AMT was never adjusted for inflation so it is slowly creeping to include everyone in the middle, he says.

Sound outrageous? Almost everything in Johnston's book about the U.S. tax system is. It's got enough shockers to induce hives and palpitations in those who simply had no idea how different the rich really are when it comes to the tax code.

[...]

The author's passion for reform goes way beyond that. He believes there's a "great national myth" that America has a progressive tax structure, that the highest income earners pay the highest taxes, that the more money you make, the larger the share of it you pay to the U.S. government.

He believed that too until nine years ago, when he started writing about taxes for the New York Times, he says. That's when he learned that the graduated system only exists for those who earn roughly between $50,000 and $500,000. Above that, watch out.

The multimillionaires, billionaires and big corporations may be paying the same proportion in taxes as you are  or even less.

[...]

The subtitle of Johnston's book ("The Covert Campaign to Rig Our Tax System to Benefit the Super Rich  and Cheat Everybody Else") just about says it all. But it is a bit misleading because it makes the author sound like a conspiracy theorist or a barnstorming liberal.

In truth, he is neither. He is a registered Republican. On a recent visit to promote his book, Johnston proved to be nothing more sinister than a man who knows too much about something most Americans know too little about: taxes.

[...]

He is filled to the exploding point with statistics: "In 1993, the richest Americans paid 30 cents on the dollar in federal income taxes. That's a lot less than most people would imagine, because a lot of middle-class families pay that. At the end of the Clinton administration, they were paying 22 cents on the dollar. And when the Bush cuts come in, they go down even further  to 17 1/2 cents on the dollar. That means the super-rich have gotten a 41% reduction in their tax burden. Did you get that reduction? No, you didn't. What happened to everyone else in America is that their taxes went up."

And that's not the half of it.

Buried within his book are priceless morsels of information that you too could use to maximize your wealth  if only you had a few dozen million dollars. They might not be fair, but they're perfectly legal.

[...]

As it stands now, most Americans have no idea what's inside the 55,000-page book of federal tax laws, and they are easily manipulated to think that laws good for the super-rich are good for them too, he says.

President Bush's campaign to "save the family farm by killing the 'death tax' is a good example," Johnston says. "I have interviewed people with virtually no assets, who literally believe that when they die, the government will come in and take half of whatever they own. That's absurd. America doesn't tax death. It's an estate tax. And it only kicks in for a married couple at $2 million. We can't save family farms by killing the estate tax because almost all family farms are worth less than what the tax starts at. That whole campaign was really about people in the billionaire class. The only farmers in America who will pay estate taxes under the current law are people like President Bush and Ted Turner."

He crisscrosses the country, lecturing "to anyone who'll listen," about the skewed tax structure and what it is doing to our nation. He's an engaging raconteur, spreading blame like manure on both political parties with power-packed anecdotes.

But he doesn't want to leave the wrong impression. He says he "doesn't want to soak the rich" and does not advocate a rise in taxes. For anyone. He just wants reform that will close some loopholes, stop the money hemorrhaging out of the U.S. and stop what he calls the subsidy of the rich by the middle class. He says his book proves that's been happening and does it by using the government's own data. "And not one significant criticism has been made of that data since the book came out."

That's correct. Some reviewers look askance at the tilt of Johnston's work but not its accuracy. High-powered tax attorneys, writing for their peers, find little new in the loopholes Johnston exposes. But the bulk of reviews reflect astonishment: How could our system have gone so wrong without us knowing it?

That's what Johnston says he's trying to fix. "I'm attempting something audacious: to explain the flaws in the tax system in a way everyone can understand. If enough people read it, maybe they'll rise up and demand change."

You read it, you know it, then you try and tell a middle class republican about it and they start with the dinner party analogy, flat tax proposals, welfare moms, social security "ponzi schemes", etc. etc.

anything anything not to admit that in the past 40 years they pay more and the super rich pay less. Smmehow they ended up in bed with the uber-wealthy and got screwed. Delusional?

What's wrong with standing up for your economic class? THe super-wealthy certainly do. They have hired a thousand lobbiests and spent millions on candidate contributions to make sure they pay less. All I am saying is you can still be a republican and demand middle class tax cuts.

Stand up for yourself! Say,"The hell with the multi-millionaires! Where's my tax cut! Let them pay for some of this!"

Tax cuts that result in deficits and higher local taxes don't count. My transit fares and higher property taxes are more than my federal income tax cut. Plus I have to pay off the federal deficit. Plus state Universities used to be cheap and of high quality.

Well, I don't believe that anyone should get hammered just because they are successful. Especially since I want to be one of those people. But, I think there needs to be a distinction in law between what is middle class and what is upperclass.

I think you should have to make more than 500,000 a year to get truely hammered.

For example. I have come from lower middle class, the only person in my family to go to college (until my brother), and so has my wife.

If we both become very successful in our jobs we could make about 275,000 a year combined. Should we have to pay for being weathly? For being successful? I don't think the middle class, or the upper middle class should be punished.

Slightly off topic, but interesting none the less. The current calender in use by most of the world, the Gregorian Calender, was NOT in use during the reign of Julius Ceaser. They were in fact using the Julian Calender, which was slightly less accurate. Currently the Julian Calender is 13 days behind the Gregorian one. Meaning that the Ides (or middle) of March which occurs on the 15th is actually happening on the 28th in the Gregorian calender.

Well, I don't believe that anyone should get hammered just because they are successful.

Click to expand...

I don't think anybody is talking about hammering, chiseling or chain-sawing the successful. Johnston is talking about restoring real progressivity to the tax system, so that people pay based on their ability to do so. Most people think that's the way it works now, but it doesn't.

I don't think anybody is talking about hammering, chiseling or chain-sawing the successful. Johnston is talking about restoring real progressivity to the tax system, so that people pay based on their ability to do so. Most people think that's the way it works now, but it doesn't.

Click to expand...

Oh, I agree with you, but I don't think that any income bracket should get destroyed by taxes. Example, if I make a million, why should I have to pay 400,000 in taxes.

i've always thought the most FAIR way to tax is straight down the line... a % that EVERYONE no matter you income pays... so if that means someone makes 10,000 a year and pays 100 in taxes and someone who makes 1,000,000 pays 10,000 in taxes so be it

MacRumors attracts a broad audience
of both consumers and professionals interested in
the latest technologies and products. We also boast an active community focused on
purchasing decisions and technical aspects of the iPhone, iPod, iPad, and Mac platforms.